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Learn more: Medicare SGR replacement payment system details

May 13, 2015

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On April 16, President Obama signed into law the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) legislation, which negates the Medicare sustainable growth rate (SGR) formula, replaces it with new payment options and extends the Children’s Health Insurance Program (CHIP). The bill was passed in a monumental bipartisan action taken by Congress, after a decade of fighting for change by the California Medical Association, the American Medical Association (AMA) and a host of other medical associations.

In summary, MACRA permanently repeals the SGR formula and stabilizes Medicare payments for physician services, with automatic annual 0.5 percent positive updates starting July 1, 2015. In 2019, it allows physicians to choose to participate in either the fee-for-service program, with a reformed quality reporting system, or alternative payment models. Starting in 2016, the legislation provides $20 million annually to help small practice physicians transition to alternative payment models or meet the new reporting program requirements. Finally, the bill provides additional medical liability protections for physicians. Starting immediately, any Medicare payment policies or quality programs shall not establish the standard of care for medical liability actions.

New fee-for-service programThe current fee-for-service program will remain intact. However, the bill replaces Medicare’s multiple quality reporting programs with a new single merit-based incentive payment system (MIPS) quality program, which will make it more likely that physicians earn bonus payments for reporting on quality and meaningful use.

Under current law, physicians potentially face up to 13 percent in penalties from the Physician Quality Reporting Program (PQRS), meaningful use (MU) and value-based modifier (VBM) reporting programs with no upside bonus payments. MACRA consolidates and simplifies these programs and reestablishes substantial bonus payments. The MIPS program should be more attainable for physicians than the current programs.

Beginning in 2019, MIPS will be the only Medicare quality reporting program. The composite and performance scores will be based on quality (30 percent), resource use (30 percent), meaningful use (25 percent) and clinical practice improvement activities (15 percent). Clinical activities are to be developed by the U.S. Department of Health and Human Services Secretary in consultation with physician organizations. Clinical registries are one way to meet this objective. The quality measures are also to be developed by physicians.

Maximum MIPS penalties and bonuses are on a sliding scale and start at 4 percent in 2019, 5 percent in 2020, 7 percent in 2021 and 9 percent in 2022 and beyond. However, physicians can earn up to three times higher bonuses. Moreover, there is an additional “exceptional performance” bonus of up to 10 percent.

In addition, the law preserves the current 10-day and 90-day global periods for over 4,000 surgical service codes that Medicare had planned to unbundle.

As the new MIPS program takes effect in 2019, the automatic annual payment updates are 0 percent from 2020-2025. However, the bill stipulates that the Medicare Payment Advisory Commission make recommendations to Congress for further action on payment updates in 2020 and beyond to ensure access to care. In 2026 and beyond, the automatic annual update is 0.25 percent.

The new MIPS program advantages include a sliding scale assessment rather than an all-or-nothing approach in meaningful use and PQRS activities. Physicians will receive credit for partially meeting the performance metrics. Physicians in practices or specialties that were at a disadvantage in the past for meeting meaningful use and quality reporting standards will find that flexible weighting will be used to bring parity to incentive payments. Physicians will now be able to receive substantial credit for clinical practice and quality improvement activities.

Physicians will be able to risk-adjust for patients with an adverse health status and other risk factors such as socio-economic status. Physicians who submit few or no Medicare claims will be exempt from the MIPS requirements and payment adjustments. Physicians will also receive confidential feedback on their performance on quality and resource use, with yearly performance targets set based on the mean/median composite score of all MIPS eligible providers from the previous time period.

Alternative Payment Models (APMs)Physicians can also choose to participate in APMs. The bill stipulates that the Secretary work with a Physician Advisory Task Force to develop these alternative payment models. Physicians participating in APMs will be required to accept some financial risk. However, primary care and specialty medical homes are not required to accept downside financial risk because they have other financial requirements. Physicians participating in APMs shall receive a 5 percent annual bonus payment from 2019-2024 and are exempt from the MIPS reporting system requirements. In 2026 and beyond, APM participants will receive 0.75 percent annual payment updates, also subject to further action by Congress.

Medicare must also release the “total cost of care” data to help physicians better manage their practices.

AMA has created two documents that give a more detailed look at MACRA. Click here to look at the details of MACRA, and click here to look at a chronological timeline when physicians can expect components of the program to go into effect.